John Murphy (Lowe, Australian Labor Party, Parliamentary Secretary to the Minister for Trade) Share this | Hansard source

There can be absolutely no doubt that in recent months—indeed, in recent weeks—the global financial crisis has entered several dangerous phases which have had inevitable consequences for the Australian economy. That is why it is imperative that the Rudd government stays one step ahead by initiating serious solutions rather than giving knee-jerk reactions to serious problems.

Responsible governments around the world have acted in these dangerous and uncertain times to secure industries, to secure jobs and to ensure that their respective countries are prepared to make the most of economic opportunities once they present themselves. Domestically, this is not possible if steady hands and rational minds are unable to restore confidence in Australian markets, which have also been battered from pillar to post by the global financial crisis. In an article titled ‘Herd instinct rules in the circle game’, Ross Gittins states:

… humans are herd animals. We’re heavily influenced by the mood of the people around us, so feelings of optimism or pessimism are contagious. We all tend to be optimistic at the same time, then swing to pessimism at much the same time.

Often it’s not easy to pinpoint—

what—

caused the herd to change direction but we can say that the general mood at any point tends to be self-reinforcing, so that when consumers and businesses swing from optimistic to pessimistic, they won’t be swinging back to optimistic … soon.

The role of government in addressing consumer and business sentiment or confidence takes on enormous importance, given the scale of the global financial crisis, its unprecedented nature and the rapidly unfolding events overseas. The contemporary role of government has also taken on increased significance in the light of the obvious failures brought about by lax regulation and disinterest by the state.

I commend the Treasurer and the Prime Minister for taking swift and decisive action to address shortcomings that have originated from poorly regulated global markets and to restore confidence in our own economy. Nowhere was this more apparent than in the government’s swift commitment to the banking sector, which globally has had to bear the brunt of much of the crisis. Rather than stand idly by and allow the legitimate concerns of Australians about confidence in their deposits to go unaddressed, the Rudd government acted.

It is true that the Australian banking system is strong, has demonstrated its resilience to the turbulence overseas and is well capitalised. Our regulations and regulators are first class. We have long benefited from a framework of regulation which balances financial safety and efficiency as well as competition and competitive neutrality, yet the government was aware that it could not view the position of our banking sector through this narrow prism.

The risk of consumer sentiment changing direction without warning is always of pre-eminent concern. Uncoordinated international announcements could, for example, have had the potential to destabilise the Australian banking system if prompt action were not taken domestically. It would not have been hard to imagine the serious risk of an outflow of capital away from the unsecured Australian banks to foreign financial institutions with government guarantees. The stability of Australia’s financial system and our institutions’ ability to attract new funds for investment in the Australian economy were very real considerations. Rather than allow first-class Australian banks to be discriminated against by foreign government backed institutions with potentially poor balance sheets, the Rudd government acted rationally and immediately.

That is why I am proud of the government’s guarantee for all deposits in Australian banks, credit unions and building societies. When coupled with common-sense regulations and credible regulators to whom appropriations will be made by this legislation, the public’s confidence in Australian financial institutions was not going to be compromised. This was a clear demonstration of decisive government action and appropriate intervention being used to stimulate consumer and business sentiment. It was also a clear demonstration that the era of unbridled, neoliberal, free-market fundamentalism has no place in Australia. As the Prime Minister has quite rightly pointed out, the global financial crisis has proven that:

… it falls to social democracy to prevent liberal capitalism from cannibalising itself.

While it would be easy to throw the free-market baby out with the bathwater, doing so is premature, unjustified and unhelpful. Just as the excesses of the Right have caused much of the destruction we are seeing in today’s markets, an extreme reaction to the Left and the notion of an all-pervading state is an experiment that has been had and is best forgotten. There is still much value in the productive capacity of well-regulated, competitive markets coupled with appropriate government intervention.

The Labor Party, the party of social democracy, has long stood for promoting the productive capacity of competitive markets, rebuilding confidence in markets when necessary and protecting individuals that are invariably left behind. The legacy of the Hawke and Keating governments should not be understated in this context. It also should come as no surprise that the Rudd government is working around the clock to rebuild domestic demand as well as to ensure that domestic and global markets are appropriately supervised. Much has already been said about the government’s $10.4 billion economic security strategy package to stimulate the economy by providing one-off payments to Australians who are most in need as well as boosting the first home buyer grant. The strategy provided support against the impact of flat domestic economic activity by targeting the people most likely to drive consumer spending as a result of the one-off payments.

More recently, the government announced its $4 billion partnership with the banking sector to finance office buildings, shopping centres and other commercial property projects. Because of the weakening demand and the tight availability of credit, almost 50,000 direct and indirect jobs are under threat in this industry. The risk of nonintervention by the government was best summed up by the AMP chief economist when he stated:

The alternative, unfortunately, would be more job losses and corporate closures.

The government announced its most recent stimulus package, the unprecedented $42 billion Nation Building and Jobs Plan, a couple of weeks ago. This is on top of the $4 billion nation-building package, the $12 billion Building Australia Fund and prior commitments to skills training and an education revolution. By combining immediate cash payments with an investment in longer term drivers of productivity, the government’s stimulus packages strike an appropriate balance between immediate support for jobs now and delivering long-term investments for future economic growth. The many initiatives in the Nation Building and Jobs Plan alone will provide a boost to economic growth of around half a per cent of GDP in 2008-09 and around three-quarters to one per cent of GDP in 2009-10. No-one could possibly argue that free markets should be left to wreak havoc on the Australian economy without government intervention. Concomitantly, no one could accuse the Rudd government of complacency in this context.

The temporary costs of these initiatives are a small price to pay for the security and confidence that will be provided for Australian industries, Australian jobs, Australia families and the Australian economy. With that in mind, the bipartisan support of these initiatives ought to have been a fait accompli. However, the opposition’s track record throughout the crisis has left much to be desired. We will long remember the shameful attacks on the Secretary to the Treasury, Dr Ken Henry, during debate on the government’s bank guarantee proposal. We all remember the opposition’s disgraceful claims that the Treasury growth forecast had ‘the whiff of manipulation’ about it. We remember the opposition bombarding Dr Henry with frivolous suggestions for six hours in Senate estimates, when Dr Henry’s time would have been better spent talking to bank chiefs about the banking guarantee. We all know that Dr Henry is one of Australia’s pre-eminent public servants. He has been held in the highest regard by both sides of politics and the business community. He did not deserve the misguided attacks on him by an opposition seeking to score a cheap political point in a time of crisis. We had hoped that the opposition would refrain from making further cheap political points during the global economic downturn.

No doubt members of the business community would be feeling the same way. While commenting on the government’s banking guarantee in October 2008, National Australia Bank chief executive John Stewart said:

It is unfortunate that this process has been so highly politicised ...

He is not wrong. The government’s stimulus package, like its banking guarantee, deserves the full support of the opposition, free of the usual political pointscoring. The packages are far more important for the national interest than the opposition’s short-term political interest or anachronistic ideological obsessions. Unfortunately, it has not taken long for the coalition’s ideological obsession to rear its ugly head.

As we now know, the Leader of the Opposition stood in this parliament in the middle of the global economic maelstrom to baselessly attack the Rudd government’s numerous stimulus packages. He continued his misguided attacks on the government’s deposit guarantee. He could not resist the cheap political shot of pleading against deficits for the sake of our children. He described the government’s $10 billion Economic Security Strategy as ‘ill considered’ and ‘ill thought out’. This is despite retail figures showing that sales skyrocketed 3.8 per cent in December compared with November. If the opposition leader’s attacks were anything other than an attempt to cling to the last vestiges of neo-liberal economic thought, he would have presented a detailed alternative vision of strong government intervention. We would have seen attacks grounded in fact and current economic orthodoxy. The fact that we did not speaks volumes about the nature of the opposition leader’s pious attacks.

Several things are now clear: (1) the coalition has no alternative plan, no alternative solution, to the crisis that confronts us, (2) the coalition is still stuck in the quagmire of discredited economic orthodoxy from another age, and (3) you cannot trust the coalition to guide us out of these dark economic clouds, because they have a natural aversion to economic stabilisers. They would rather pontificate on the sidelines while the market spins wildly out of control. This approach is not only unwise; in my view, it is extremely dangerous. It is tantamount to committing economic suicide. The opposition would do well to listen to the many families and community groups that are crying out for more support, particularly in my electorate of Lowe. They would also do well to observe the advice of the Business Council of Australia, the Australian Industry Group, the Property Council of Australia and the International Monetary Fund—all of whom have applauded the government’s handling of this crisis.

Market libertarians are no longer justified in making an argument against public spending and intervention or against better regulation and closer supervision. That said, we cannot allow the world to return to protectionism under the guise of stimulating domestic demand and consumption. Australia’s fate is inextricably linked to that of the other world economies. The continuing financial crisis has provided a pertinent reminder of just how closely the world’s major economies are linked. Six out of Australia’s 10 largest trading partners are already in recession, and that has clearly contributed to the $115 billion hole in Australia’s budget. Opening the door to global opportunities also means exposure to global risk. However, this crisis does not warrant calls for isolationist policies. No-one can argue that the globalised economy, which has brought tremendous benefits to Australia and other nations, should be wound back. World trade has been one of the drivers of global growth over the past six years. Trade is itself a stimulus because it has a multiplier effect on domestic activity. There can be nothing worse than one trading partner’s reversion to isolationist policies under the guise of ‘fiscal domestic stimulus’, invariably followed by a tit-for-tat response from other trading partners. We cannot allow global exports, global trade, to suffer in this way.

The global economic crisis tells us that only a truly global response can put our economies back on track. In November last year WTO Director-General Lamy said that the international response to the economic crisis must include initiatives that lock in the benefits of globalisation as well as manage its risks. He is absolutely right. Free trade is not part of the problem; it is part of the solution. That is why concluding the Doha Round remains one of the Australian government’s highest trade policies and also why the Minister for Trade, the Hon. Simon Crean, has been working tirelessly to generate the political will and high-level commitment needed to conclude the Doha Round. No-one has worked harder than Simon Crean in the international environment to resuscitate Doha, which is so critical for our country and so critical for the world at this time.

Finally, at this most critical of junctures for the Australian economy a successful conclusion of the Doha Round and a genuine liberalisation of trade in goods and services would provide a significant boost to confidence. Perhaps this is something that all sides of politics can agree on.

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